Chapter 13 - Pitfalls for Investors to Watch For

Although a trust deed investment is one of the safer investments you can make, it is imperative that you understand there are still risks involved. The best way to ensure that you avoid pitfalls is to learn as much as you can about trust deed investing and everything it involves. However, to give you an idea of some of the pitfalls you should watch out for, the following are a few tips:

It is always in your best interest to physically inspect any real estate you are intending to invest in, even if the property has already been checked out by the appraiser, broker or title company.

Take the time to establish your personal opinion regarding the value of the real estate collateral. You can do this by using a number of approaches such as:
? Ask your realtor for information on closed sales of comparable properties
? If you were to purchase the property today, what would it be worth to you?
? Read the appraisal

Take the time to learn the difference between personal and real property. You dont want to confuse personal property for real property when you are establishing your opinion in regards to value. Real property is that which is considered to be affixed to the earth. However, dont mistake all property that is fastened to the ground to be real property; some of these items are personal.

You should make it a point to know how the borrower is planning to pay the private money loan. Just because short term loans are primarily funded based on real estate equity, you should discover what the borrower has already pre-approved for their take out loan.

When it comes to Loan to Value Ratio that concerns homes occupied by owners, you should never lend out a LTV that exceeds 60%, even if the home appears to be the most ideal of owner occupied homes. Likewise, as far as non-owner occupied homes are concerned, the LTV should not exceed 50%

You should never rely on future promises regarding improvements unless the proper draws for the upcoming work that is to be completed is officially set up.

Make sure you do not want or require any final, additional documentation before you close. Such documentation can include, but is not limited to following:
? Certificate of occupancy
? Well report
? Proof of purchase cost
? Notice of completion
? Closing statements
? Roof reports
? Toxic reports
? Sign off of final permit card
? Etc.


Take the time to research everything you can about trust deed investments. Speak to qualified professionals, and dont be afraid to ask questions, or rethink your decisions before making an investment. By following these guidelines, you will lower the risk you take when making a trust deed investment, and will be less likely to experience a pitfall.

Smart Trust Deed Investing

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The instructions for escrow that you will be requested to sign could be unilateral (separate set of instructions for the buyer and separate ones for the seller) or bilateral (one set of instructions for the seller and one for the buyer). Investing in a deed of trust generates a monthly income that is established through interest payments. A legal description of the property that is to be transferred 4. Now thats a difference worthy of your attention. Recourse Note V For this note, the endorser is making a guarantee that the payments will be given to the present holder, as well as all the other holders.

What about IRAs and other Retirement Programs?
However, if problems do arise, the borrower is encouraged to set them right should they wish to protect their equity in the project. Understand the escrow process. If in the event the investor held a second deed of trust, and the initial trust deed holder began a foreclosure action, the investor would receive notification. Under the beneficiarys instructions, the foreclosure officer will prepare the above documents. Judicial Foreclosure V this process is the more costly method and is when the courts are utilized to foreclose on the property, and an attorney is required.

The reason is because ALTA provides a broader range of coverage compared to CLTA.
The following is how a typical loan service is conducted. _ The security position of the stock owner is shared among thousands of other holders. How long is a Mortgage Investment Term? Know your borrowers financial status and their credit worthiness. Lastly, should the foreclosure be stalled or halted by a borrowers bankruptcy petition, the in-house legal counsel will immediately try to relieve the stall or request the bankruptcy court provide sufficient protection. Aside from the security of real property, with a trust deed investment, the other advantage is the investor receives higher than average rates of return.